[quote=AN]The real question is why they’re not letting some of it go? We all know that there’s a lot of demand out there right now in certain areas under certain price point. If they really are actively and purposely holding those back, would it make sense for them to release some of them now? There are plenty of multiple offers out there, so those unsuccessful other offers = real buyers that would gladly buy at today’s price. Why hold back the inventory?[/quote]

The mortgage is $600K. While the mortgage owner sits idle, due to the suspension of mark-to-market rules, the mortgage owner is allowed to maintain the fiction that an asset worth $600K is owned.

As soon as the property is sold for $400k, whether via short sale, auction, or REO, the deception is no longer possible, and the mortgage owner takes a $200K loss. Do this enough times, and owners’ equity in the mortgage owning organization is reduced to the point that they are declared to be the owners no longer (regulatory takeover or bankruptcy liquidation).

When members of congress threatened legislation to override the Financial Accounting Standards Board (FASB) if they did not reverse themselves and withdraw the mark-to-market rules, the leaders of the “independent” FASB “agreed” to go along.

So now mortgage owners have a choice:
1. Go fast, die today.
2. Go slow, remain “solvent” in the short run, hope for salvation in the longer run, either due to direct rescue assistance, the effect of government subsidies to buyers, or generalized inflation driving all prices higher (including the price of of the mortgaged houses).